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London open: Stocks rally amid Brexit hopes, US stimulus progress

By Michele Maatouk

Date: Wednesday 16 Dec 2020

LONDON (ShareCast) - (Sharecast News) - London stocks racked up healthy gains in early trade on Wednesday, with sentiment underpinned by Brexit hopes and US stimulus progress.
At 0900 GMT, the FTSE 100 was 1.2% higher at 6,589.57, while the pound was up 0.3% against the dollar at 1.3499 after EU Commission President Ursula von der Leyen said there had been progress in trade talks and that the next few days would be critical.

Speaking in Brussels, she said there was now "a path to an agreement", with the two sides having found a way forward on most issues, although the issues of the level playing field and fisheries remain outstanding.

There were also reports the UK has dropped its push for the renationalising of fishing vessels.

Spreadex analyst Connor Campbell said: "A positive swell of headlines led to gains across the board on Wednesday morning, following a surge from the Dow Jones that saw it close a fraction below 30,200.

"The Dow was driven higher by renewed hopes of a stimulus relief bill being passed in Congress before the year is over. Combined, the proposed measures would total $908 billion to $748 billion to fund 16 weeks of enhanced unemployment insurance, and a further $160 billion to cover things like state and local aid.

"That figure is less than half the $2.2 trillion package House Democrats passed earlier in the year, and lower than the pre-election numbers bandied about by Nancy Pelosi and Steven Mnuchin before the election.

"Still, the States is desperate for a deal - something likely to be reiterated by the Federal Reserve this evening - and this bipartisan offering appears to stand the best chance of getting passed before Friday's shutdown deadline."

The mood was also lifted by the rollout of the Pfizer/BioNTech vaccine across the US, which meant "investors were more than happy to get involved", Campbell said.

On home shores, the latest figures from the Office for National Statistics showed inflation slowed sharply in November as the price of clothing, food and non-alcoholic drinks declined, with Black Friday playing its part.

Consumer price inflation fell to 0.3% from 0.7% in October, coming in below consensus expectations of 0.6%.

ONS deputy national statistician for Economic Statistics, Jonathan Athow, said: "With significant restrictions in place across the UK, inflation slowed, predominantly due to clothing and food prices. Also, after several months of buoyant growth, second-hand car prices fell back a little."

The biggest downward contribution came from clothing and footwear, which saw prices fall 2.6% between October and November, compared to a 1% increase in the same period a year ago. The ONS said prices usually rise between these two months but price movements across 2020 have been unusual compared with previous years and appear to have been affected by the coronavirus lockdowns.

This year, the decline reflects increased discounting and Black Friday discounts lasting longer than usual.

Laith Khalaf, financial analyst at AJ Bell, said: "We shouldn't set too much store by one month's inflation figure, particularly this time around when a second national lockdown meant the statisticians weren't able to collect all of the usual data.

"However, the broader picture remains one of low inflation and that spells low interest rates for the foreseeable. We can expect inflation to tick up next spring, when the basis for comparison moves into the post-pandemic era and the big drop in fuel prices falls out of the equation in March, but that won't be enough to persuade the Bank of England to tighten monetary policy."

In equity markets, housebuilders were among the top performers amid Brexit optimism, with Barratt, Persimmon and Taylor Wimpey all higher.

Dixons Carphone surged after it said trading was strong in the runup to Christmas despite store closures as the electricals retailer reported surging online sales. The company swung to a pre-tax profit of 45m for the six months to the end of October from a loss of 86m a year earlier as revenue rose 3% to 4.86bn.

Builders' merchant Travis Perkins rallied as it reported an 8.6% rise in like-for-like sales in October and November amid "strong" demand in the DIY market, and said it will repay the business rates relief it received for the Covid-19 crisis.

On the downside, Bunzl lost ground after the distribution and services group forecast revenue growth of 8% in 2020, but lower growth next year as larger Covid-19 related orders slowed down.

Petrofac was in the red after increasing its target for cost cuts as the oil field services company said it was trading in line with expectations in uncertain conditions.

Market Movers

FTSE 100 (UKX) 6,589.57 1.17%
FTSE 250 (MCX) 20,085.38 1.17%
techMARK (TASX) 4,093.29 1.19%

FTSE 100 - Risers

Barratt Developments (BDEV) 641.00p 3.19%
St James's Place (STJ) 1,142.50p 3.02%
Royal Dutch Shell 'B' (RDSB) 1,352.60p 2.91%
Standard Life Aberdeen (SLA) 295.10p 2.82%
SSE (SSE) 1,484.50p 2.77%
M&G (MNG) 195.80p 2.76%
Persimmon (PSN) 2,725.00p 2.68%
International Consolidated Airlines Group SA (CDI) (IAG) 161.85p 2.66%
Legal & General Group (LGEN) 260.50p 2.64%
Melrose Industries (MRO) 173.20p 2.58%

FTSE 100 - Fallers

Bunzl (BNZL) 2,377.00p -4.00%
Standard Chartered (STAN) 474.90p -1.02%
Smurfit Kappa Group (SKG) 3,454.00p -0.75%
Croda International (CRDA) 6,236.00p -0.64%
B&M European Value Retail S.A. (DI) (BME) 508.60p -0.55%
Smiths Group (SMIN) 1,563.50p -0.51%
HSBC Holdings (HSBA) 402.00p -0.16%
Rentokil Initial (RTO) 504.40p 0.08%
Severn Trent (SVT) 2,310.00p 0.09%
Ashtead Group (AHT) 3,345.00p 0.12%

FTSE 250 - Risers

Dixons Carphone (DC.) 121.70p 12.06%
Vistry Group (VTY) 911.00p 4.71%
RHI Magnesita N.V. (DI) (RHIM) 3,498.00p 4.11%
BlackRock Smaller Companies Trust (BRSC) 1,598.00p 4.04%
Redrow (RDW) 541.00p 3.74%
easyJet (EZJ) 855.00p 3.54%
Airtel Africa (AAF) 76.20p 3.53%
Henderson Smaller Companies Inv Trust (HSL) 998.00p 3.53%
Crest Nicholson Holdings (CRST) 314.00p 3.43%
Shaftesbury (SHB) 552.50p 3.37%

FTSE 250 - Fallers

Petrofac Ltd. (PFC) 169.30p -2.08%
Fisher (James) & Sons (FSJ) 924.00p -0.65%
UK Commercial Property Reit Limited (UKCM) 67.10p -0.59%
JPMorgan Japanese Inv Trust (JFJ) 709.00p -0.42%
Network International Holdings (NETW) 295.00p -0.41%
Scottish American Inv Company (SAIN) 455.00p -0.22%
Trainline (TRN) 470.40p -0.21%
BBGI Global Infrastructure S.A. NPV (DI) (BBGI) 170.00p -0.12%
Electrocomponents (ECM) 872.00p -0.06%
Plus500 Ltd (DI) (PLUS) 1,386.00p -0.04%